Broker’s call

CMP: ₹124.90

Target:₹102

In Q2-FY20, Gabriel India’s revenue declined by 12.7 per cent y-o-y to ₹472.70 crore on account of 39 per cent/27 per cent y-o-y decline in PV and CV segments. However, 2W revenue grew by 3 per cent y-o-y. Growth in two-wheeler segment was on account of increase in market share of TVS and addition of other successful models like Jawa, RE twin models and Suzuki models.

PV and CV (particularly LCV, MCV and HCV) volumes decline by 50 per cent, 30 per cent and 59 per cent y-o-y, respectively. The management does not expect any major revival in the industry until BS-VI transition takes place. The export business of Gabriel was also under pressure as there was weakness in Columbia due to phasing out of old models and slowdown in Sri Lanka and Latin America which are two major export markets for the company.

Valuation: Going forward, negative operating leverage would keep margins under 9 per cent levels. Factoring the challenging demand outlook and limited scope for margin expansion, we downgrade the stock to a ‘Sell’, with a price target of ₹102 per share.

CMP: ₹133.15

Target: ₹200

ONGC reported EBITDA of ₹13,290 crore (-16 per cent/-12 per cent: y-o-y /q-o-q), missed our estimate of ₹13,550 crore due to lower oil + gas sales volumes and realisations. However, PAT at ₹6,260 crore (-24 per cent/+6 per cent y-o-y/q-o-q), beat estimate of ₹4,920 crore, driven by higher other income of ₹2,690 crore (12 per cent y-o-y).

Oil production stood at 5.8 mt against estimates of 5.9mt, while gas production was 6.3 bcm vs estimates of 6.5 bcm. This is the first decline in gas production in 13 quarters. Total VAP sales at 850 kt was below our estimates of 950 kt, mainly on weak LPG sales of 242 kt, naphtha sales of 287kt and C2-C3 sales of 280kt. Total O+G sales volumes of 10.3 mmtoe were below our estimates of 10.5 mmtoe. In Q2, sales volumes were impacted due to a fire incident at the ONGC’s processing facility at Uran.

Management has revised guidance for the KG Basin asset downwards to 32-34 bcm (88-93 mmscmd) by FY24E from earlier expectations of 38-40bcm (104-109 mmscmd), suggesting higher reservoir complexity and execution challenges from this large asset. Also, the weak performance in H1 drags down FY20E production as well. With oil production now declining y-o-y for eight successive quarters, operational performance will remain subdued for next 12-15M, before recovering from FY22E, as per latest estimates and guidance.